New Delhi: The Union Cabinet has approved the scheme for Viability Gap Funding (VGF) for the development of Battery Energy Storage Systems (BESS) with an initial outlay of Rs.9,400 crore, including budgetary support of Rs 3,760 crore.

By offering VGF support, the scheme targets achieving a Levelized Cost of Storage (LCoS) ranging from Rs. 5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country, the Ministry of Power said on Wednesday.

BESS scheme aims at developing 4,000 MWh of BESS projects by 2030-31, with financial support of up to 40% of the capital cost as budgetary support in the form of Viability Gap Funding (VGF).

“A watershed moment in the long list of pro-environment measures taken by the Government, the move is expected to bring down the cost of battery storage systems increasing their viability,” read the statement.

The ultimate aim VGF scheme is to provide clean, reliable, and affordable electricity to the citizens, according to the government.

The VGF will be disbursed in five tranches linked with the various stages of implementation of BESS projects.

To ensure that the benefits of the scheme reach the consumers, a minimum of 85% of the BESS project capacity will be made available to Distribution Companies (Discoms).

This will not only enhance the integration of renewable energy into the electricity grid but also minimize wastage while optimizing the utilization of transmission networks.

Consequently, this will reduce the need for costly infrastructure upgrades.

The selection of BESS developers for VGF grants will be carried out through a  transparent competitive bidding process, promoting a level playing field for both public and private sector entities.

“This approach will foster healthy competition and encourage the growth of a robust ecosystem for BESS, attracting significant investments and generating opportunities for associated industries,” said the statement.